Hong Kong shares sink for third day, China drops further

Hong Kong shares fell for a third straight day on Tuesday, as weak import growth in China last month fuelled concern over flagging domestic demand, with investors expecting more disappointing macroeconomic data out of China later this week.

Mainland Chinese markets sank to six-month lows after data showed China's imports rose 6.3 percent in June from a year earlier, less than half the 12.7 percent increase forecast in a Reuters poll.

Profit concerns dominated both markets, with an eye ahead to the the upcoming earnings reporting season in August.

The Hang Seng Index shed 0.2 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong slipped 0.6 percent. Turnover was among the lowest for the year so far.

In the mainland, the large cap-focused CSI300 Index closed down 0.4 percent at 2,406.7, the lowest since Jan. 16. The Shanghai Composite Index slipped 0.3 percent as trading volumes declined 21 percent from Monday.

Turnover is not going to improve anytime soon with data now suggesting the slowdown in the Chinese economy is nowhere near a bottom, said Edward Huang, an equity strategist with Haitong International Securities.

First half earnings announcements are not going to be pretty, he said, adding that while he expected further declines he doubted whether lows of 18,056.4 points seen in June on the Hang Seng benchmark would be breached.

For now, investors' focus will shift to China's second-quarter gross domestic product report due on Friday, which was expected to show the lowest growth in at least three years.

Growth-sensitive sectors were among the biggest drags in both markets, but the Chinese property sector was particularly weak after Poly Real Estate, China's second-largest property developer by market value, reported unaudited first half net profit that was 12 percent below a year earlier.

Shares of ZTE Corp closed in Hong Kong and Shenzhen at the lowest in more than three years due to concerns over its first-half earnings and a dispute between the European Union and China over industry subsidies.

Samsonite International S.A., the world's biggest luggage maker, closed down 6 percent at its lowest level in six months on talk that its two largest shareholders will trim their stakes, traders said.

Embattled Chinese meat processor, China Yurun Food Group Ltd slumped to its lowest in almost six years. It shed another 6.6 percent in almost seven times its 30-day average volume after Monday's 10 percent dive.

Several brokerages warned that its founder's resignation as chairman is likely to compound uncertainty surrounding the company. Credit Suisse strategists dropped Yurun from their China model portfolio.